Whether you are buying a shop, taking a lease of an office or acquiring an industrial unit, Land and Buildings Transaction Tax (LBTT) is likely to be one of the largest costs of the deal after the price or the rent itself. This guide explains how LBTT works on commercial property in Scotland, the current rates for purchases and leases, the returns you need to make and the points that most often catch businesses out.
In brief
- LBTT replaced Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015 and is collected by Revenue Scotland.
- Commercial purchases are taxed in slices: 0% up to £150,000, 1% from £150,001 to £250,000 and 5% above £250,000.
- New commercial leases are taxed on the net present value (NPV) of the rent: 0% up to £150,000, 1% up to £2 million and 2% above that.
- The return and any tax are due within 30 days of the effective date, and notifiable leases need further returns every three years.
- Buying the shares of a company that owns property does not trigger LBTT.
What is LBTT?
The Land and Buildings Transaction Tax (Scotland) Act 2013 received Royal Assent in July 2013, and LBTT replaced UK Stamp Duty Land Tax in Scotland from 1 April 2015. It applies to land transactions with an effective date on or after that day, covering both residential and non-residential (commercial) property.
LBTT borrowed much of its structure from SDLT, but it was designed around Scots property law and has its own rates, rules and reporting requirements. If your business also holds property in England or Northern Ireland, do not assume that the SDLT rules you know will apply north of the border.
LBTT is administered by Revenue Scotland, which works closely with Registers of Scotland. That link is what makes compliance unavoidable in practice: a buyer or tenant cannot register their title until the LBTT return has been made.
LBTT rates for commercial purchases
LBTT on a non-residential purchase is charged in slices, much like income tax. Each rate applies only to the part of the price that falls within its band, rather than one rate applying to the whole price. When LBTT was introduced, SDLT still charged commercial purchases at a single rate on the whole price, so this was one of the clearest differences between the two taxes. SDLT has since moved to the same slice approach, but the bands and rates on each side of the border are still different.
| Portion of the price | LBTT rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 1% |
| Above £250,000 | 5% |
Worked example
Buying a £500,000 office
- First £150,000 at 0%£0
- Next £100,000 at 1%£1,000
- Remaining £250,000 at 5%£12,500
Total LBTT: £13,500, an effective rate of 2.7% of the price.
Three points are worth knowing before you budget for a commercial property purchase:
- VAT counts. If the seller has opted to tax the building, LBTT is calculated on the VAT inclusive price, even if your business can recover the VAT.
- Mixed-use property is taxed at non-residential rates. A shop with a flat above, bought in a single transaction, is taxed at the commercial rates on the whole price.
- Linked transactions are added together. Buying several units from the same seller as part of one deal can push the combined price into a higher band.
You can check figures with Revenue Scotland’s property transactions calculator, although your solicitor should confirm the final figure, particularly where reliefs, VAT or linked transactions are involved.
How LBTT works on commercial leases
When a new commercial lease is granted, LBTT is charged on the net present value (NPV) of the rent payable over the term of the lease. The NPV calculation discounts each future year of rent at 3.5% a year, so a long lease at a modest rent can still produce a significant NPV.
| NPV of rent payable | LBTT rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £2,000,000 | 1% |
| Above £2,000,000 | 2% |
Worked example
A new lease with an NPV of £400,000
- First £150,000 at 0%£0
- Remaining £250,000 at 1%£2,500
Total LBTT: £2,500. If the landlord also charges a premium for granting the lease, the premium is taxed separately at the purchase rates shown above.
A new lease generally needs an LBTT return where tax is payable, which for rent alone means an NPV above £150,000. Licences to occupy are generally exempt, which is one reason the choice between a lease and a licence matters for short-term or flexible space. Revenue Scotland also has a lease transactions calculator for working out the NPV.
Whether you are a tenant taking on new premises or a landlord granting a lease, it is worth settling how rent free periods, stepped rents and any turnover rent will be documented at the heads of terms stage, because each of these feeds directly into the NPV calculation.
Lease returns after the lease starts
This is the part of LBTT that most often catches businesses out. LBTT on a commercial lease is not a one-off payment made when the lease is signed. The tax is recalculated over the life of the lease using the rent actually paid, which means further returns are needed for as long as the lease runs.
- Three-yearly review returns. A return is due on every third anniversary of the effective date, within 30 days of that anniversary. If the rent has gone up after a rent review, more tax may be payable. If it has gone down, you may be due a repayment.
- Assignation returns. When a lease is assigned, a return is needed within 30 days, and the new tenant takes over responsibility for the returns that follow.
- Termination returns. A final return is due within 30 days of the lease ending, whether at expiry, on early termination or by renunciation.
These returns are required even where no further tax is payable, and missing one can lead to penalties. They apply to leases taxed under LBTT, so leases granted before 1 April 2015 and taxed under SDLT are generally outside the regime. Extending or varying one of those older leases can have LBTT consequences, so take advice before agreeing new terms on a commercial lease extension.
It is good practice to diarise every return date as soon as the lease is signed. Our guide to navigating commercial leases in Scotland covers the other obligations worth tracking over the term.
Deadlines, payment and penalties
The LBTT return must be submitted, and any tax paid, within 30 days of the effective date, which is usually the date of entry. Your solicitor will normally submit the return online and pay the tax from funds you provide, and Registers of Scotland will not register your title until the return has been made.
If a return is late, Revenue Scotland can charge:
- a fixed penalty of £100 as soon as the filing date has passed
- daily penalties of £10 for up to 90 days if the return is still outstanding after three months
- a further penalty of 5% of the tax due or £300, whichever is greater, at six months, and again at twelve months
Interest is also charged on tax that is paid late. Building the 30 day deadline into your completion timetable from the outset is the simplest way to avoid all of this.
Reliefs and structuring points
Several reliefs can reduce or remove LBTT on commercial transactions, provided the conditions are met and the relief is claimed in the return. The ones we see most often are:
- Group relief for transfers of property between companies in the same group
- Sale and leaseback relief where a business sells its premises and takes a lease back
- Reconstruction and acquisition reliefs for certain company reorganisations
- Charities relief for property bought by a charity for charitable purposes
Some reliefs can be clawed back if circumstances change within three years, for example if a company leaves the group, so the position needs to be kept under review after the transaction.
How a deal is structured matters too. If you buy the shares of a company that owns property, no LBTT is payable because the property itself does not change hands; stamp duty at 0.5% is due on the share price instead. Our article on asset sales and share sales explains the wider trade-offs, and our business sale and purchase solicitors can advise on which route suits your deal.
Moving property you already own into a limited company is another common trigger. Where the company is connected to you, LBTT is usually charged on the market value of the property rather than any price paid, so read our guide to transferring property to a limited company before making the move.
Frequently asked questions
Do I pay LBTT if I buy commercial property through a company?
Yes. LBTT is payable by the buyer, whether that is an individual, a partnership or a company, and the non-residential rates are the same whoever is buying.
Is LBTT charged on the VAT element of the price?
Yes. Where VAT is payable on the purchase, LBTT is calculated on the VAT inclusive price. This applies even if your business can reclaim the VAT.
Who is responsible for the LBTT return?
The buyer or tenant is legally responsible for making the return and paying the tax. In practice, your solicitor prepares and submits it as part of the transaction.
What happens to LBTT after a rent review?
A rent review does not normally need a return of its own. The next three-yearly review return recalculates the NPV using the rent actually paid, and any extra tax or repayment is dealt with then.
Is LBTT due on a licence to occupy?
Licences to use or occupy land are generally exempt, so no LBTT is due. Make sure the document really is a licence, though, because an arrangement that gives exclusive possession in return for rent may be treated as a lease.
Is LBTT payable when I sell commercial property?
No. LBTT is a tax on the buyer or tenant. If you are selling commercial property, the buyer pays it, although the price you agree and whether VAT is charged will affect the buyer’s LBTT bill.
Need help with LBTT on a commercial deal?
Our commercial property solicitors deal with the LBTT return as part of every purchase and lease, and can check your existing leases to make sure no review returns have been missed. Call 0141 471 9166 or book a free consultation.
Related services and guides
This guide reflects LBTT rates and Revenue Scotland guidance as at October 2026. It is general information rather than tax advice on your transaction, so please speak to us before relying on it.